Friday September 9, 2016
Oil prices settled higher for the fourth consecutive day (and at the highest level in two weeks) after the Department of Energy (DOE) inventory summary showed a massive (but surely Hermine-impacted) crude oil stock draw. Oil stocks were reported to have fallen by over 14-million barrels, largely driven by a sharp dip in imports (down nearly two million barrels per day, week-on-week), though that is easily explainable by ships being held at sea and ports being closed in anticipation of last week’s storm.
The oil market had certainly been trending higher before the stats, but the anomalous large draw caused another sharp price spike. Trading volume on Thursday was abnormally high, leading to the conclusion that some short covering was also in order (the move up in price causing bears to, temporarily, abandoned that view and buy back short positions). October WTI gained over two dollars on the day (settling at $47.62). For a more detailed view of the DOE data, please read the detailed summary below.
RBOB and Heating Oil also posted significant gains (seven cents and six cents, respectively). In addition to the large crude oil stock draw, gasoline inventories fell by four million barrels on strong demand and (again) a reduction in imports. Cash differentials in the Gulf Coast were fairly stable, after a few days of extreme volatility, as marketers try to work off the remaining summer grade gas in tanks.
- Net inputs of crude oil ripped higher for the week on the back of the Gulf Coast (PADD III)
- The elevated level of processing is abnormal at this point in year. Last year for instance set a record for crude throughput at 17.075 million barrels per day and by this point last year we were over 800 thousand barrels below our current level.
- Distillate production is edging closer toward the outright levels of last year in September which averaged 5 million barrels per day
- Production of gasoline was essentially flat week on week, but 10.2 million barrels per day is a very high level to be producing at this point in the year
- The news maker of the report: commercial crude inventories fell 14.5 million barrels the second largest reported draw since the EIA began tracking it (largest draw was 15.2MMbbls from the week ending 1/1/1999)
- This draw number is not terribly surprising following the havoc Hermine wreaked on the ability to receive incoming tankers which caused imports to fall 1.85 million barrels per day last week (1.85MMbpd over seven days is 12.95-million-barrel draw)
- Distillate stocks continued the build for the fifth consecutive week, this 3.38-million-barrel build is the largest of the recent builds. We currently sit at nearly the same point as we were in the same week of 2011, that year inventories fell 25.5 million barrels over the next 11 weeks
- Stocks of gasoline drew a large amount, completely made up by the East and Gulf Coasts (PADD I and III respectively) as the other three districts offset each other. The total inventory level has fallen 13.66 million barrels over the last six weeks, but still remains well above any of the past five years.
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